🚀 Defense sector sees profits galore

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MARKET UPDATE

Shares of Meta dropped 12% after hours despite the company massively exceeding expectations. This was due to lowered Q2 guidance and increased full-year total expenses estimate.

TODAY’S BIG HEADLINES

• Defense sector sees profits galore

• Amazon launches another subscription

• Senate approves the TikTok ban

• The return of the diesel-powered truck

EARNINGS RESULTS

Defense sector sees profits galore🚀

Guns & Missiles: On a fine Tuesday, arms-maker Lockheed Martin (LMT) didn’t just meet Wall Street’s expectations, it blew them out of the water! With their quarterly earnings results on both the top and bottom line, it’s clear that global tensions have done nothing but fuel the demand for their products. The company reported an overall revenue of a whopping $17.2 billion for the first quarter, a 14% rise that’s as impressive as a perfectly executed magic trick, effortlessly surpassing the Street’s expectations of $16.02 billion. And for the cherry on top, they confirmed full-year guidance.

To Infinity & Beyond: Lockheed reported a surge that’s as colossal as Godzilla, with a 25.3% year-over-year increase to $3 billion in its missiles and fire control unit. It seems the Ukrainian conflict has sparked a missile demand that’s hotter than a summer barbecue.

Aircraft Ascend: Lockheed’s aeronautics business, the proud parent of the world’s most advanced fighter jet, the F-35, saw sales soar 9% year-over-year, reaching a sky-high $6.85 billion. And it’s no secret that Israel has a bit of a shopping addiction when it comes to these fighter jets.

Backed by Uncle Sam: Just last week, the US Missile Defense Agency announced that Lockheed Martin had been awarded a $17 billion contract. Their mission, should they choose to accept it, is to develop the next generation of interceptor aircraft intended to defend the US against an ICBM attack.

sources: (Reuters), (Bloomberg)

MEGA CAPS

Amazon launches another subscription🛍️

Exclusive Access: Just days after announcing that drone deliveries in California were so last season, e-commerce king Amazon (AMZN) unveiled a new subscription. This new offering will sit atop the existing Prime membership like a crown, allowing customers to take advantage of their grocery delivery prowess. It’s as if they’ve taken a leaf out of the Birkin bag playbook and are attempting to turn Prime into an exclusive VIP club.

Another Feather in The Cap: On a sunny Tuesday afternoon, Amazon announced their new “unlimited” grocery delivery subscription. Starting at $9.99 on top of the existing $14.99 Prime subscription, this service will be available in 3,500 cities in the US at launch. The subscription will allow customers to make unlimited orders with free delivery, as long as the total order value is above $35. This gives customers access to groceries from the likes of Whole Foods and Amazon Fresh, but also local grocers and specialty retailers that they’ve partnered with. And in a move as sweet as a cherry pie, Amazon will be offering the service at half price for low-income non-Prime members who qualify.

The Financials: Amazon’s Prime membership subscription generated $40.2 billion in 2023, accounting for roughly 7% of Amazon’s total revenue. It’s one of their more lucrative endeavors, providing predictable, recurring revenue. And based on the data, Prime members outspend their non-Prime counterparts as drastically as a cheetah outruns a tortoise.

Wall Street Whispers: On the emergence of this news, shares of grocery delivery company Instacart (CART) dropped as much as 2% on Wednesday morning. A very similar reaction we saw from both Uber (UBER) and Lyft (LYFT) after Tesla (TSLA) provided a preview of their upcoming ride-hailing app. What’s the lesson here? The market hates it when big tech crashes the party uninvited. Or in other words, they showed up to the black-tie event in flip-flops!

sources: (The Verge), (Yahoo)

GEOPOLITICS

Senate approves the TikTok ban💸

TikTok On The Clock: Earlier this week, the US House of Representatives passed a bill that could force TikTok’s parent company, ByteDance, to part ways with its beloved social media app. This proposal was cleverly tucked into the $95 billion foreign aid bill in the Senate, making it a “must-approve” bill. Without batting an eye, the Senate passed the bill. Now, all eyes are on President Joe Biden, who has already expressed his intention to sign it into law.

The TikTok Tangle: Here’s the lowdown for those out of the loop. Once approved, this bill will give ByteDance up to a year to sell TikTok to a non-Chinese owned company. Failure to do so will result in the app being banned in the US faster than you can say “ByteDance”. This puts ByteDance in a pickle. Even if they sell, it’s likely to be for half the company’s worth due to their current predicament leaving them no room for negotiation. If they don’t sell, they could lose their most lucrative market overnight, decimating the value of the asset. Either way, it’s a lose-lose situation for the Chinese company.

The Bidding War: The question on everyone’s lips is, which companies could potentially purchase the asset without raising antitrust concerns? According to a recent Bloomberg estimate, TikTok’s US business is valued at around $40-$50 billion. Tech titans Alphabet (GOOGL), Microsoft (MSFT), and Meta (META) all have enough cash in their coffers to join this auction. In fact, Microsoft even tried to buy TikTok as recently as 2020.

Return of The Shark: In a surprising twist, Kevin O’Leary has thrown his hat in the ring, stating that he’s rallying a group of investors to make a bid of between $20 billion and $30 billion, considerably below Bloomberg’s estimated valuation.

Political Power Play: Another potential suitor is none other than Steve Mnuchin. Yes, you heard it right, the former Secretary of the Treasury has announced his intention to assemble a group of investors to buy TikTok for roughly the same price as Kevin O’Leary’s group.

sources: (The Verge), (Fortune)

EARNINGS RESULTS

The return of the diesel-powered truck🛢️

Diesel Revival: If Tesla’s (TSLA) dismal earnings report on Tuesday night wasn’t clear enough, General Motors’ (GM) earnings results have firmly cemented a shift in consumer behavior in the automotive industry. EVs are out, and trucks are in.

The Numbers Game: GM posted its biggest earnings beat in a year, with Q1 profits jumping 25% to $3 billion. Revenue smashed expectations, coming in at $43 billion, up 7% year-over-year. GM reported that it increased its market share across several pickup and new SUV models, leaving Ford and Stellantis in the dust.

GM’s Truck Triumph: Despite the best-selling car in the US in 2023 being a Ford (F), the title of the second best-selling car belongs to the GM-made Chevy Silverado, with 543,319 units sold.

The Road Ahead: GM’s CFO Paul Jacobson quipped, “Our consumer has been remarkably resilient in this period of higher interest rates”, “We think, in this environment, we can continue to perform.” Echoing Fed chairman Jerome Powell’s stance that the US economy is still going strong, and hinting that there’s more in store for the automaker this year.

sources: (caranddriver), (CNN), (MorningStar)

MORE NEWS

Additional market-moving events🌎

• US New Home Sales Surge: In March, sales figures for newly built single-family homes in the US surged by 8.8%, indicating robust demand, despite the high mortgage rates and softening demand seen across the housing market. (CNN)

• Goodbye Noncompetes: The FTC have now announced a new rule which effectively outright bans noncompete clauses in employment contracts for the majority of workers. (nytimes)

• Chips Are Back: After Texas Instruments suprised the street by beating earnings expectations, we witnessed a rally across all chip stocks including ASML, TSM, Nvidia and ARM. (Yahoo)

• Coke Joins The AI Craze: Coca Cola announced it will be committing $1.1 billion to harness Microsoft's generative AI for a tech evolution that will transform its global supply chain. (Cointelegraph)

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